Yahoo History Suggests Resistance to an AOL Takeover

Yahoo may be the target of a takeover bid, according to rumors. However, Yahoo's corporate culture and its rejection of Microsoft suggest it would fight hard.

Could Yahoo find itself an acquisition target?
That seems to be the question drifting around the Web, following news that a
handful of private equity firms were exploring the prospect of teaming with AOL
or News Corp. for a Yahoo takeover. Yahoo's stock price leapt upward, and Bank
of America Merrill Lynch analyst Justin Post told Reuters that private-equity
focus on Yahoo "makes sense."

The Wall Street Journal also reported that AOL
had discussed the prospect of a Yahoo bid with private equity firms Blackstone
Group and Silver Lake Partners. "The deal would reportedly include Yahoo
selling off its 40 percent stake in Chinese Internet search giant Alibaba
Group, parent company of Hong Kong-listed Alibaba.com Ltd," the newspaper
reported Oct. 14.

But Yahoo has had the ability to resist aggressive takeovers before-most
notably in the case of Microsoft, which
pushed to acquire Yahoo in 2008. That resulted in Yahoo publicly refusing
an enormous offer of $47 billion rather than become a Redmond
subsidiary.
That raised the specter of vicious proxy fight, with Microsoft attempting to
seize sympathetic seats on Yahoo's board. But that effort petered out, too,
angering Yahoo shareholders who had smelled the prospect of a major payday with
Microsoft buying stock at a premium. Their anger, in turn, drove Yahoo
co-founder Jerry Yang from the CEO slot.
In a November 2008 letter to Yahoo employees, Yang tried to put a
positive spin on developments. "The fact remains that Yahoo is now a
significantly different company that is stronger in many ways than it was just
18 months ago," he wrote. "This only makes it all the more essential
that we manage this opportunity to leverage the progress up to this point as
effectively as possible."

Yang's successor, Carol Bartz, seemed much more open to selling
off Yahoo's assets. In a May 2009 interview at the seventh annual D: All
Things Digital conference, she told technology columnist Kara Swisher that
Yahoo would sell its search business to Microsoft "if there [are]
boatloads of money and the right technology involved."
When asked whether she would sell Yahoo in its entirety to Microsoft, Bartz
replied: "They'd have to have biiiig boatloads of money," according
to a transcript.
But later that summer, Microsoft and Yahoo ended up entering a 10-year
search and advertising agreement in which Bing would take over Yahoo's back-end
search, while Yahoo assumed worldwide sales duties for both companies' search
advertisers. Microsoft also paid Yahoo about $150 million in expenses.
Ever since, Bartz has maintained an aggressive program of cutting and
streamlining the company. "We're really revising everything," she
said during
a September 2009 presentation at the Nasdaq MarketSite in Times Square. "Where
it makes sense, we will sell, and where it makes sense, we will shut
down."
In other words, if private equity really does want to make a play for Yahoo,
the company's history and corporate culture might transform any takeover battle
into a real fight-one that Yahoo, even with its diminished profile, has solid
odds of winning.

Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.